GUS plc - Experian plc
GUS plc January 2006
Frankfurt/Paris
Transforming GUS EBIT* £519m
Pro forma EBIT* £740m
Home shopping 7%
Property 6%
Finance
ARG
5% 30%
Lewis Burberry
9%
Experian
ARG
50%
50%
4% 39%
Experian
Year to March 2000
Year to September 2005
* Before central activities; 2005 excludes £34.5m of ARG one-offs
1
Transforming GUS • Shareholder value to be enhanced further by separation of ARG, Experian and Burberry – at a time and in a manner that benefits our businesses and causes minimum disruption • Sold remaining 50% stake in Lewis in May 2005 • Demerged Burberry in December 2005 • ARG and Experian – At appropriate time, seek separation – At this stage, both businesses will continue to benefit from further investment and support as part of GUS
2
Q3 Trading Update Q3 % sales growth year-on-year Argos
Homebase
Experian*
-
total
9
-
like-for-like
0
-
total
-
like-for-like
1 (3)
-
Global
20
-
North America
31
-
International
* Continuing activities only; at constant exchange rates
8
3
Argos Retail Group
Argos Retail Group – overview EBIT*
• Leading UK general merchandise retailer
Financial Services Homebase
• Multi-brand, multi-channel Argos
22%
• Supported by central infrastructure, where appropriate
77%
Year to September 2005 £371m
* Excludes £34.5m of one-offs
6
ARG – difficult market background • Weak UK retail demand
LFLs falling in non-food, non-clothing market
• Retailers facing higher cost inflation
% 5
• ARG planning on assumption that like-for-like sales in non-food, non-clothing market will decline for much of 2006
0
-5
FY03 Q1
FY04 Q2
Q3
Q4
Q1
Q2
• ARG continuing to invest to strengthen long-term competitive position
FY05 Q3
Q4
Q1
Q2
Q3
Market growth
Source: GUS estimates
7
Argos • More than two-thirds of UK households collect a catalogue from store • Currently 650 stores • 98% of the UK population live within 10 miles of a store • 6% of sales ordered via Internet* • Further 13% via Check and Reserve* • 17,200 products in catalogue (SS06) • Market leader in many product categories • Low cost operator • Value retailer
* Oct to Dec 2005
8
Argos – growth initiatives
Improve choice
• Launched Argos Extra in all stores
Improve value
• Increase direct importing • Drive cost productivity/efficiencies
Improve convenience
• Grow Argos Direct • Open more stores, including Index refits • Improve multi-channel services, including Check and Reserve
9
Argos Extra • First trial in January 2003 • Offers 17,200 lines with extended ranges in leisure, home and electrical • From July 2005, Argos Extra ranges available in all stores – c. 180 stores stocked-in – Rest are order-in • Expected to increase sales by 2-3% in first full year
10
Argos – new stores • 33 Index stores refitted and reopened on plan • Opening c. 35 new stores a year • Plan for about 750 stores by March 2009 • Return on capital on new stores exceeds hurdle rate
11
Homebase • Number two DIY brand in UK • High brand awareness – ABC1 customers – Female shoppers • 297 stores, biased to South East • Become the leading UK home enhancement retailer • Cautious short-term industry outlook
12
Homebase – growth initiatives
Improve customer offer
• • • • •
Homebase Way Range reviews New ad campaign Improve service and standards Improve stock availability
Increase new space
• New stores • Mezzanine roll-out
Leverage ARG scale
• • • •
Joint sourcing Furniture Extra and Appliances Extra Transactional website Financial Services
13
Experian
Experian - overview • Sales of £1.5bn and EBIT of £369m in 12 months to September 2005; highly cash generative • Largest global information solutions company • No single competitor offers as many products and solutions • No single competitor operates successfully in so many countries • Experian has strong market positions and client relationships
16
Experian – what we do
e.g. consumer credit databases
e.g. credit scoring
Credit
Credit
Information
Solutions
Marketing
Marketing
e.g. marketing databases
e.g. database management
Outsourcing
Interactive
e.g. cheque processing
e.g. online lead generation
17
Experian – balanced portfolio
International 42%
North America 58%
Interactive
Interactive
19%
19%
Outsourcing 8%
Information 42%
Outsourcing 8%
49%
Solutions
Marketing
31%
24%
Sales – six months to September 2005 Continuing activities
Credit
18
Experian – broad offering % of sales by vertical market
Publishing/media 2% Government 3% Automotive 3%
Other 6%
• Over 50,000 clients in more than 60 countries
Financial services 53%
Telecom/utilities/ insurance 8%
• Top 10 clients account for about 25% of sales • At least 85% of top 50 clients dealt with Experian for over five years
Direct-toconsumer 12%
Clients include: • AOL Time Warner • BNP Paribas • Barclays • Citigroup • Ford • HBOS
Retail/ home shopping 13%
Year to March 2005
• • • • • •
MBNA McDonald’s Microsoft Morgan Stanley Orange Société Générale 19
Experian – building shareholder value Sales* £m 949
EBIT* £m
1,018 1,115 1,201 1,286 1,362 808
201
217
224
256
282
317
200
+16% +18%
+20%
+14%
+20%
+12% +2%
+5%
+3% +3%
+36%
+29%
2000
2001
2002
2003 2004
Year to March
2005 H1 06
2000
2001
2002
2003 2004
2005 H1 06
Year to March
2005 onwards under IFRS * Growth rates at constant currency and from 2004 for continuing activities only
20
Experian - key growth drivers • Growth in direct-to-consumer market and online advertising • Increase in consumer credit and card usage • Move to multi-channel marketing • Growth in fraud prevention • Growth in demand for information in new sectors, e.g. automotive, insurance, business-to-business, government • Growth in emerging markets
21
Experian Interactive
Credit reports and monitoring services
Online lead generation
22
Experian Interactive • High growth markets
Online advertising spend to grow rapidly $bn 25
• Strong market position • Scale gives strong advertising presence on Internet
18% CAGR ‘04 to ‘09
20
• Synergies across Interactive and Experian
15
• Internationally scaleable
10 5
09e
08e
07e
06e
04
05e
03
02
01
00
0
Year
Source: eMarketer
23
Experian – emerging markets • Establishing country management teams • Developing credit bureaux in Russia, Bulgaria and Romania • Growing decision solutions in Korea – Six of top seven banks are clients – About 70% of all consumer credit decisions made via Experian solutions – Selling value-added products through leading credit bureau • First major win in Japan • In Russia, now working with six of top 15 banks following credit bureau launch in April 2005
24
Experian – acquisition strategy • Organic growth accelerated in last four years • Acquisitions are key part of growth strategy • Often small; always complementary; bringing – Data – New products – Geographical expansion – Vertical market expansion – Consolidation • Must generate double-digit post-tax returns over time
25
GUS - summary • Further strategic and operational progress • Focusing on fewer activities • Board committed to separation of ARG and Experian • Continue to drive sustainable growth in ARG and Experian
26
Appendix
Sales by division
12 months to 31 March
2005 £m
2004 £m
Argos Retail Group
5,313
4,927
Experian
1,362
1,286
-
6
Central activities Inter-divisional sales Total continuing operations
(12)
(11)
Impact of exchange rate £m (69) -
6,663
6,208
(69)
Burberry
715
676
(24)
Discontinued operations*
409
664
7,787
7,548
Total sales
6 (87)
* Consists of Lewis (2005: £187m, 2004: £160m), Wehkamp (2005: £222m, 2004: £235m) and Home shopping and Reality (2005: nil, 2004: £269m)
28
Profit by division (UK GAAP) Impact of exchange rate £m
12 months to 31 March
2005 £m
2004 £m
Argos Retail Group*
401.6
394.1
-
Experian
318.3
282.2
(17.4)
Central activities
(24.1)
(19.9)
-
Total continuing operations
695.8
656.4
(17.4)
Burberry
165.7
141.2
(4.9)
75.3
82.9
936.8
880.5
Discontinued
operations#
Operating profit Interest expense Profit before goodwill, exceptionals and tax
(26.4) 910.4
(53.9) 826.6
2.4 (19.9) 2.1 (17.8)
* After £35m of one-off charges # Consists of Lewis (2005: £55.4m, 2004: £43.5m), Wehkamp (2005: £19.9m, 2004: £21.4m) and Property (2005: nil, 2004: £18.0m)
29
EBITDA by division (UK GAAP) 12 months to 31 March Argos* Homebase* Financial Services Experian North America Experian International Central activities Continuing operations Burberry Discontinued operations# Depreciation and amortisation Net interest Profit before amortisation of goodwill, exceptionals and tax
2005 £m 381 145 4 255 167 (15) 937 190 83 (274) (26)
2004 £m 361 150 (4) 258 143 (17) 891 170 96 (276) (54)
910
827
* Argos and Homebase are shown after one-off charges of £16m and £18m respectively # Consists of Lewis (2005: £59m, 2004: £47m), Wehkamp (2005: £24m, 2004: £25m), Home shopping and Reality (2005: nil, 2004: £4m) and Property (2005: nil, 2004: £20m)
30
Pro forma results (IFRS) As 12 months to 31 March 2005 reported £m Continuing operations 852 Discontinued operations 78 Net interest (24) Pro forma interest on disposal proceeds Benchmark PBT 906 Amortisation of acquisition intangibles (4) Exceptional items (4) Fair value remeasurements 898 Tax (250) Tax on pro forma interest on disposal proceeds Equity minority interests (49) Profit attributable to equity shareholders 599 Benchmark EPS 61.5p Weighted average number of ordinary shares (m) 1,000 Net debt at 30 September (1,768) Net assets at 30 September 3,376
Exclude: Burberry Wehkamp
Lewis Pro forma
(161) (5)
(23) -
(55) 1
691 (28)
(166)
8 (15)
14 (40)
22 685
(3) (169) 53
(15) 4
(24) (64) 16
(4) (31) 650 (177)
39
(2) -
(4) 10
(6) -
(77)
(13)
(42)
467 60.2p
(85) (462)
255 (222)
-
849 (1,598) 2,692
31
Burberry demerger Calculation of number of Burberry shares received Number of existing GUS shares in issue/issuable* Number of Burberry shares held by GUS For every 1,000 existing GUS shares, receive Burberry shares of
1004.9m 306.7m 305
* Excludes own shares held in Treasury and includes 3.5m to cover potential share option exercises up to record date
32
GUS share consolidation Calculation of number of new GUS shares received Value of 1,000 existing GUS shares at 863p
=
£8,630
- Receive 305 Burberry shares at 394p
=
£1,202 £7,428
- New GUS shares must be worth in total - Equivalent to 860 new GUS shares at 863p each
=
£7,422
Therefore, to keep the GUS share price at approximately the same level, for every 1,000 existing GUS shares, shareholders will receive new GUS shares of
860
33
Dividend payout For every 1,000 existing GUS shares, shareholders receive interim dividend of – 2.5p X 305 Burberry shares – 9.6p X 860 new GUS shares
This is approximately equivalent to 2004 interim dividend of 9.0p per share
=
£7.63
=
£82.56
=
£90.19
=
£90.00
34
Group balance sheet (IFRS)
As at
30 Sept 2005 £m
Fixed assets
1,542
1,382
Investments
131
118
Working capital
355
701
Net assets held for sale*
31 March 2005 £m
222
-
Trading assets
2,250
2,201
Goodwill
2,822
2,477
Taxation
35
35
Transaction consideration
37
98
Net debt
(1,768)
(1,427)
Capital employed
3,376
3,384
* Represents Wehkamp. Under IFRS, the balance sheet at 31 March 2005 is not restated for Wehkamp or Lewis
35
Strong cash flow
12 months to 31 March
2005 £m
2004* £m
Operating profit
937
880
Depreciation
274
276
Capital expenditure
(390)
(306)
Change in working capital
(167)
(272)
Operating cash flow
654
578
Interest
(42)
(48)
Corporation tax
(238)
(176)
Free cash flow
374
354
* Restated for UITF Abstract 38
36
Return on capital (UK GAAP) Return on capital pre-tax 8.5% 8.8% 9.9% 10.8% 13.3% 13.6%
Return on capital post-tax 6.5% 6.8% 7.5% 8.4% 10.2% 10.3%*
+2.5% +0.3%
+1.8% +0.1% +0.9% +0.7% +0.3%
+0.9% +1.1% +0.3%
2000 2001 2002 2003 2004 2005
2000 2001 2002 2003 2004 2005
Year to March
Year to March
* Excluding £35m one-off charges in ARG, 2005 return on capital post-tax is 10.6% Restated for UITF Abstract 38
37
Illustrative credit rating agency analysis £m Balance sheet net debt*
1,598
Add capitalised operating leases (8x)#
2,408
Add pension deficit (pre-tax)* Net pension adjusted debt EBITDA# Operating leases# EBITDAR Balance sheet net debt/EBITDA Net pension adjusted debt/EBITDAR
102 4,108 932 301 1,233 1.7x 3.3x
* As at 30 September 2005. Net debt adjusted for Burberry net cash of £85m and Wehkamp net proceeds due of £255m # Year to 31 March 2005. Operating lease expense adjusted for Burberry, Wehkamp and Lewis of £39m, £1m and £6m respectively. IFRS EBITDA adjusted for Burberry, Wehkamp and Lewis of £185m, £27m and £59m respectively 38
UK households – ratio of debt to post-tax household income x 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9
07F
06F
Year
05F
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
89
88
87
0.8
Source: Experian Business Strategies
39
UK households - capital and interest repayments as % of post-tax income 18.3
18.2
07F
17.6
18
06F
% 20
16.2
13.6
13.5
01
12.8
00
12.9
99
14
98
16
14.3
14.9
12 10 8 6 4 2
Total Source: Experian Business Strategies
05F
Year Capital repayments
04
03
02
0
Interest 40
Argos – cost increase H1 2005 One-off and IFRS-related costs
5%
Underlying inflation
4%
Investments/productivity improvements - Argos Extra - New space - Distribution
4%
Total cost increase
13%
41
Homebase – cost increase H1 2005 Underlying cost inflation
4%
Investments/productivity improvements - New space/mezzanines - Furniture Extra
3%
Total cost increase
7%
• Greater impact on EBIT from inflation as operating costs are higher proportion of sales than at Argos • Cautious short-term industry outlook
42
ARG strategic sourcing – potential benefits 5-10%
50
Savings potential %
45
e-procurement
10-15%
40 35
Direct sourcing
30
5-10%
25 20 15
30-50%
10-15%
10
Cumulative potential
One agent vs multiple
Import vs domestic
5 0
Year 1
Year 2
Year 3
Year 4
43
Argos – increasing choice and convenience Argos Direct Share of sales
Argos catalogue Number of product lines 17,000
17,500
22% 17,200
20% 18%
13,000
13,300
16%
11,600
12%
9,300
SS02
SS03 Argos
SS04
SS05
Argos Extra
SS06
2001
2002
2003
2004
2005
Year to March 44
Experian - geographical split Sales
North America £724m 54%
EBIT
International £620m 46%
North America £189m 59%
International £127m 41%
Employees
North America 4,516 38%
International 7,300 62%
Year to March 2005 Continuing activities only
45
Experian – competitive strength No single competitor offers as many products and solutions in as many countries Global sales revenue $m
$2.5bn
North America
20x
21x
International
32x 20x 22x
Experian
D&B
Equifax
Acxiom
Mar 05
Dec 04
Dec 04
Mar 05
All figures are for last full year of actuals Number on top of bar represents prospective PE rating Exchange rate £1:$1.85
Harte-Hanks Fair, Isaac Dec 04
Sep 05
Source: Company accounts I/B/E/S estimates
46
Experian – accelerating organic growth Sales growth* %
• Organic growth accelerating 27%
15%
• H2 estimated acquisition contribution
18% 14%
14%
8%
6%
• Supplemented by targeted acquisitions
9%
– c. 20% in North America – Minimal in International
12%
7%
2% 5%
6%
2002
2003
9%
8%
2004
2005
YTD 06
Year to March Contribution from acquisitions Organic growth * At constant currency and for continuing activities only
47
UK consumer credit growth slowing Gross lending growth slowed, but some offset as client spend shifts from acquiring customers to managing existing accounts 25
Annual % change
20
15
Net lending
10
5
Gross lending 0 2010F
2009F
2008F
2007F
2006F
2005
Source: Bank of England; Experian Business Strategies forecasts
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-5
48
Experian – success in Spain Experian Spain now has the widest end-to-end range of solutions
1994
1999
Establish credit bureau
Enter with scoring/ decisions
2001
2002
2004
2003
Win main credit bureau contract
2005
Add fraud prevention/ anti-money laundering
Start credit card processing for US client Marketing Launch Mosaic Services consumer acquisition segmentation
Credit bureau contract extended to 2010
49
Experian Interactive - common business model Consumers Experian websites
Search listings
Partners
Affiliates
Broadcast
Customer acquisition channels Experian modelling and analytics
Experian data assets
Customer monetisation Customer acquisition
Lead generation
Experian products
Advertisers 50
Experian Interactive PriceGrabber Classes USA /Affiliate Fuel
Consumer Direct MetaReward
LowerMyBills
Experian Interactive Pro forma sales in H1 2005 51
US mortgage market $bn
US mortgage originations Year to December
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500
Purchase originations Source: Mortgage Bankers Association – December 2005
07F
06F
05
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
0
Refinance originations 52
Financial calendar
12 April 2006
-
Second Half Trading Update
24 May 2006
-
Preliminary Results
19 July 2006
-
AGM and First Quarter Trading Update
16 November 2006
-
Interim Results
53
Contacts GUS plc One Stanhope Gate London W1K 1AF Tel: +44 20 7 495 0070 Fax: +44 20 7 495 1567 Website: www.gusplc.com David Tyler Group Finance Director Tel: +44 20 7 318 6204 Fax: +44 20 7 318 6257 Email: [email protected]
Fay Dodds Director of Investor Relations Tel: +44 20 7 318 6245 Fax: +44 20 7 318 6253 Email: [email protected]
Peter Blythe Director of Finance Tel: +44 20 7 318 6230 Fax: +44 20 7 318 6253 Email: [email protected] 54
Frankfurt/Paris
Transforming GUS EBIT* £519m
Pro forma EBIT* £740m
Home shopping 7%
Property 6%
Finance
ARG
5% 30%
Lewis Burberry
9%
Experian
ARG
50%
50%
4% 39%
Experian
Year to March 2000
Year to September 2005
* Before central activities; 2005 excludes £34.5m of ARG one-offs
1
Transforming GUS • Shareholder value to be enhanced further by separation of ARG, Experian and Burberry – at a time and in a manner that benefits our businesses and causes minimum disruption • Sold remaining 50% stake in Lewis in May 2005 • Demerged Burberry in December 2005 • ARG and Experian – At appropriate time, seek separation – At this stage, both businesses will continue to benefit from further investment and support as part of GUS
2
Q3 Trading Update Q3 % sales growth year-on-year Argos
Homebase
Experian*
-
total
9
-
like-for-like
0
-
total
-
like-for-like
1 (3)
-
Global
20
-
North America
31
-
International
* Continuing activities only; at constant exchange rates
8
3
Argos Retail Group
Argos Retail Group – overview EBIT*
• Leading UK general merchandise retailer
Financial Services Homebase
• Multi-brand, multi-channel Argos
22%
• Supported by central infrastructure, where appropriate
77%
Year to September 2005 £371m
* Excludes £34.5m of one-offs
6
ARG – difficult market background • Weak UK retail demand
LFLs falling in non-food, non-clothing market
• Retailers facing higher cost inflation
% 5
• ARG planning on assumption that like-for-like sales in non-food, non-clothing market will decline for much of 2006
0
-5
FY03 Q1
FY04 Q2
Q3
Q4
Q1
Q2
• ARG continuing to invest to strengthen long-term competitive position
FY05 Q3
Q4
Q1
Q2
Q3
Market growth
Source: GUS estimates
7
Argos • More than two-thirds of UK households collect a catalogue from store • Currently 650 stores • 98% of the UK population live within 10 miles of a store • 6% of sales ordered via Internet* • Further 13% via Check and Reserve* • 17,200 products in catalogue (SS06) • Market leader in many product categories • Low cost operator • Value retailer
* Oct to Dec 2005
8
Argos – growth initiatives
Improve choice
• Launched Argos Extra in all stores
Improve value
• Increase direct importing • Drive cost productivity/efficiencies
Improve convenience
• Grow Argos Direct • Open more stores, including Index refits • Improve multi-channel services, including Check and Reserve
9
Argos Extra • First trial in January 2003 • Offers 17,200 lines with extended ranges in leisure, home and electrical • From July 2005, Argos Extra ranges available in all stores – c. 180 stores stocked-in – Rest are order-in • Expected to increase sales by 2-3% in first full year
10
Argos – new stores • 33 Index stores refitted and reopened on plan • Opening c. 35 new stores a year • Plan for about 750 stores by March 2009 • Return on capital on new stores exceeds hurdle rate
11
Homebase • Number two DIY brand in UK • High brand awareness – ABC1 customers – Female shoppers • 297 stores, biased to South East • Become the leading UK home enhancement retailer • Cautious short-term industry outlook
12
Homebase – growth initiatives
Improve customer offer
• • • • •
Homebase Way Range reviews New ad campaign Improve service and standards Improve stock availability
Increase new space
• New stores • Mezzanine roll-out
Leverage ARG scale
• • • •
Joint sourcing Furniture Extra and Appliances Extra Transactional website Financial Services
13
Experian
Experian - overview • Sales of £1.5bn and EBIT of £369m in 12 months to September 2005; highly cash generative • Largest global information solutions company • No single competitor offers as many products and solutions • No single competitor operates successfully in so many countries • Experian has strong market positions and client relationships
16
Experian – what we do
e.g. consumer credit databases
e.g. credit scoring
Credit
Credit
Information
Solutions
Marketing
Marketing
e.g. marketing databases
e.g. database management
Outsourcing
Interactive
e.g. cheque processing
e.g. online lead generation
17
Experian – balanced portfolio
International 42%
North America 58%
Interactive
Interactive
19%
19%
Outsourcing 8%
Information 42%
Outsourcing 8%
49%
Solutions
Marketing
31%
24%
Sales – six months to September 2005 Continuing activities
Credit
18
Experian – broad offering % of sales by vertical market
Publishing/media 2% Government 3% Automotive 3%
Other 6%
• Over 50,000 clients in more than 60 countries
Financial services 53%
Telecom/utilities/ insurance 8%
• Top 10 clients account for about 25% of sales • At least 85% of top 50 clients dealt with Experian for over five years
Direct-toconsumer 12%
Clients include: • AOL Time Warner • BNP Paribas • Barclays • Citigroup • Ford • HBOS
Retail/ home shopping 13%
Year to March 2005
• • • • • •
MBNA McDonald’s Microsoft Morgan Stanley Orange Société Générale 19
Experian – building shareholder value Sales* £m 949
EBIT* £m
1,018 1,115 1,201 1,286 1,362 808
201
217
224
256
282
317
200
+16% +18%
+20%
+14%
+20%
+12% +2%
+5%
+3% +3%
+36%
+29%
2000
2001
2002
2003 2004
Year to March
2005 H1 06
2000
2001
2002
2003 2004
2005 H1 06
Year to March
2005 onwards under IFRS * Growth rates at constant currency and from 2004 for continuing activities only
20
Experian - key growth drivers • Growth in direct-to-consumer market and online advertising • Increase in consumer credit and card usage • Move to multi-channel marketing • Growth in fraud prevention • Growth in demand for information in new sectors, e.g. automotive, insurance, business-to-business, government • Growth in emerging markets
21
Experian Interactive
Credit reports and monitoring services
Online lead generation
22
Experian Interactive • High growth markets
Online advertising spend to grow rapidly $bn 25
• Strong market position • Scale gives strong advertising presence on Internet
18% CAGR ‘04 to ‘09
20
• Synergies across Interactive and Experian
15
• Internationally scaleable
10 5
09e
08e
07e
06e
04
05e
03
02
01
00
0
Year
Source: eMarketer
23
Experian – emerging markets • Establishing country management teams • Developing credit bureaux in Russia, Bulgaria and Romania • Growing decision solutions in Korea – Six of top seven banks are clients – About 70% of all consumer credit decisions made via Experian solutions – Selling value-added products through leading credit bureau • First major win in Japan • In Russia, now working with six of top 15 banks following credit bureau launch in April 2005
24
Experian – acquisition strategy • Organic growth accelerated in last four years • Acquisitions are key part of growth strategy • Often small; always complementary; bringing – Data – New products – Geographical expansion – Vertical market expansion – Consolidation • Must generate double-digit post-tax returns over time
25
GUS - summary • Further strategic and operational progress • Focusing on fewer activities • Board committed to separation of ARG and Experian • Continue to drive sustainable growth in ARG and Experian
26
Appendix
Sales by division
12 months to 31 March
2005 £m
2004 £m
Argos Retail Group
5,313
4,927
Experian
1,362
1,286
-
6
Central activities Inter-divisional sales Total continuing operations
(12)
(11)
Impact of exchange rate £m (69) -
6,663
6,208
(69)
Burberry
715
676
(24)
Discontinued operations*
409
664
7,787
7,548
Total sales
6 (87)
* Consists of Lewis (2005: £187m, 2004: £160m), Wehkamp (2005: £222m, 2004: £235m) and Home shopping and Reality (2005: nil, 2004: £269m)
28
Profit by division (UK GAAP) Impact of exchange rate £m
12 months to 31 March
2005 £m
2004 £m
Argos Retail Group*
401.6
394.1
-
Experian
318.3
282.2
(17.4)
Central activities
(24.1)
(19.9)
-
Total continuing operations
695.8
656.4
(17.4)
Burberry
165.7
141.2
(4.9)
75.3
82.9
936.8
880.5
Discontinued
operations#
Operating profit Interest expense Profit before goodwill, exceptionals and tax
(26.4) 910.4
(53.9) 826.6
2.4 (19.9) 2.1 (17.8)
* After £35m of one-off charges # Consists of Lewis (2005: £55.4m, 2004: £43.5m), Wehkamp (2005: £19.9m, 2004: £21.4m) and Property (2005: nil, 2004: £18.0m)
29
EBITDA by division (UK GAAP) 12 months to 31 March Argos* Homebase* Financial Services Experian North America Experian International Central activities Continuing operations Burberry Discontinued operations# Depreciation and amortisation Net interest Profit before amortisation of goodwill, exceptionals and tax
2005 £m 381 145 4 255 167 (15) 937 190 83 (274) (26)
2004 £m 361 150 (4) 258 143 (17) 891 170 96 (276) (54)
910
827
* Argos and Homebase are shown after one-off charges of £16m and £18m respectively # Consists of Lewis (2005: £59m, 2004: £47m), Wehkamp (2005: £24m, 2004: £25m), Home shopping and Reality (2005: nil, 2004: £4m) and Property (2005: nil, 2004: £20m)
30
Pro forma results (IFRS) As 12 months to 31 March 2005 reported £m Continuing operations 852 Discontinued operations 78 Net interest (24) Pro forma interest on disposal proceeds Benchmark PBT 906 Amortisation of acquisition intangibles (4) Exceptional items (4) Fair value remeasurements 898 Tax (250) Tax on pro forma interest on disposal proceeds Equity minority interests (49) Profit attributable to equity shareholders 599 Benchmark EPS 61.5p Weighted average number of ordinary shares (m) 1,000 Net debt at 30 September (1,768) Net assets at 30 September 3,376
Exclude: Burberry Wehkamp
Lewis Pro forma
(161) (5)
(23) -
(55) 1
691 (28)
(166)
8 (15)
14 (40)
22 685
(3) (169) 53
(15) 4
(24) (64) 16
(4) (31) 650 (177)
39
(2) -
(4) 10
(6) -
(77)
(13)
(42)
467 60.2p
(85) (462)
255 (222)
-
849 (1,598) 2,692
31
Burberry demerger Calculation of number of Burberry shares received Number of existing GUS shares in issue/issuable* Number of Burberry shares held by GUS For every 1,000 existing GUS shares, receive Burberry shares of
1004.9m 306.7m 305
* Excludes own shares held in Treasury and includes 3.5m to cover potential share option exercises up to record date
32
GUS share consolidation Calculation of number of new GUS shares received Value of 1,000 existing GUS shares at 863p
=
£8,630
- Receive 305 Burberry shares at 394p
=
£1,202 £7,428
- New GUS shares must be worth in total - Equivalent to 860 new GUS shares at 863p each
=
£7,422
Therefore, to keep the GUS share price at approximately the same level, for every 1,000 existing GUS shares, shareholders will receive new GUS shares of
860
33
Dividend payout For every 1,000 existing GUS shares, shareholders receive interim dividend of – 2.5p X 305 Burberry shares – 9.6p X 860 new GUS shares
This is approximately equivalent to 2004 interim dividend of 9.0p per share
=
£7.63
=
£82.56
=
£90.19
=
£90.00
34
Group balance sheet (IFRS)
As at
30 Sept 2005 £m
Fixed assets
1,542
1,382
Investments
131
118
Working capital
355
701
Net assets held for sale*
31 March 2005 £m
222
-
Trading assets
2,250
2,201
Goodwill
2,822
2,477
Taxation
35
35
Transaction consideration
37
98
Net debt
(1,768)
(1,427)
Capital employed
3,376
3,384
* Represents Wehkamp. Under IFRS, the balance sheet at 31 March 2005 is not restated for Wehkamp or Lewis
35
Strong cash flow
12 months to 31 March
2005 £m
2004* £m
Operating profit
937
880
Depreciation
274
276
Capital expenditure
(390)
(306)
Change in working capital
(167)
(272)
Operating cash flow
654
578
Interest
(42)
(48)
Corporation tax
(238)
(176)
Free cash flow
374
354
* Restated for UITF Abstract 38
36
Return on capital (UK GAAP) Return on capital pre-tax 8.5% 8.8% 9.9% 10.8% 13.3% 13.6%
Return on capital post-tax 6.5% 6.8% 7.5% 8.4% 10.2% 10.3%*
+2.5% +0.3%
+1.8% +0.1% +0.9% +0.7% +0.3%
+0.9% +1.1% +0.3%
2000 2001 2002 2003 2004 2005
2000 2001 2002 2003 2004 2005
Year to March
Year to March
* Excluding £35m one-off charges in ARG, 2005 return on capital post-tax is 10.6% Restated for UITF Abstract 38
37
Illustrative credit rating agency analysis £m Balance sheet net debt*
1,598
Add capitalised operating leases (8x)#
2,408
Add pension deficit (pre-tax)* Net pension adjusted debt EBITDA# Operating leases# EBITDAR Balance sheet net debt/EBITDA Net pension adjusted debt/EBITDAR
102 4,108 932 301 1,233 1.7x 3.3x
* As at 30 September 2005. Net debt adjusted for Burberry net cash of £85m and Wehkamp net proceeds due of £255m # Year to 31 March 2005. Operating lease expense adjusted for Burberry, Wehkamp and Lewis of £39m, £1m and £6m respectively. IFRS EBITDA adjusted for Burberry, Wehkamp and Lewis of £185m, £27m and £59m respectively 38
UK households – ratio of debt to post-tax household income x 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9
07F
06F
Year
05F
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
89
88
87
0.8
Source: Experian Business Strategies
39
UK households - capital and interest repayments as % of post-tax income 18.3
18.2
07F
17.6
18
06F
% 20
16.2
13.6
13.5
01
12.8
00
12.9
99
14
98
16
14.3
14.9
12 10 8 6 4 2
Total Source: Experian Business Strategies
05F
Year Capital repayments
04
03
02
0
Interest 40
Argos – cost increase H1 2005 One-off and IFRS-related costs
5%
Underlying inflation
4%
Investments/productivity improvements - Argos Extra - New space - Distribution
4%
Total cost increase
13%
41
Homebase – cost increase H1 2005 Underlying cost inflation
4%
Investments/productivity improvements - New space/mezzanines - Furniture Extra
3%
Total cost increase
7%
• Greater impact on EBIT from inflation as operating costs are higher proportion of sales than at Argos • Cautious short-term industry outlook
42
ARG strategic sourcing – potential benefits 5-10%
50
Savings potential %
45
e-procurement
10-15%
40 35
Direct sourcing
30
5-10%
25 20 15
30-50%
10-15%
10
Cumulative potential
One agent vs multiple
Import vs domestic
5 0
Year 1
Year 2
Year 3
Year 4
43
Argos – increasing choice and convenience Argos Direct Share of sales
Argos catalogue Number of product lines 17,000
17,500
22% 17,200
20% 18%
13,000
13,300
16%
11,600
12%
9,300
SS02
SS03 Argos
SS04
SS05
Argos Extra
SS06
2001
2002
2003
2004
2005
Year to March 44
Experian - geographical split Sales
North America £724m 54%
EBIT
International £620m 46%
North America £189m 59%
International £127m 41%
Employees
North America 4,516 38%
International 7,300 62%
Year to March 2005 Continuing activities only
45
Experian – competitive strength No single competitor offers as many products and solutions in as many countries Global sales revenue $m
$2.5bn
North America
20x
21x
International
32x 20x 22x
Experian
D&B
Equifax
Acxiom
Mar 05
Dec 04
Dec 04
Mar 05
All figures are for last full year of actuals Number on top of bar represents prospective PE rating Exchange rate £1:$1.85
Harte-Hanks Fair, Isaac Dec 04
Sep 05
Source: Company accounts I/B/E/S estimates
46
Experian – accelerating organic growth Sales growth* %
• Organic growth accelerating 27%
15%
• H2 estimated acquisition contribution
18% 14%
14%
8%
6%
• Supplemented by targeted acquisitions
9%
– c. 20% in North America – Minimal in International
12%
7%
2% 5%
6%
2002
2003
9%
8%
2004
2005
YTD 06
Year to March Contribution from acquisitions Organic growth * At constant currency and for continuing activities only
47
UK consumer credit growth slowing Gross lending growth slowed, but some offset as client spend shifts from acquiring customers to managing existing accounts 25
Annual % change
20
15
Net lending
10
5
Gross lending 0 2010F
2009F
2008F
2007F
2006F
2005
Source: Bank of England; Experian Business Strategies forecasts
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-5
48
Experian – success in Spain Experian Spain now has the widest end-to-end range of solutions
1994
1999
Establish credit bureau
Enter with scoring/ decisions
2001
2002
2004
2003
Win main credit bureau contract
2005
Add fraud prevention/ anti-money laundering
Start credit card processing for US client Marketing Launch Mosaic Services consumer acquisition segmentation
Credit bureau contract extended to 2010
49
Experian Interactive - common business model Consumers Experian websites
Search listings
Partners
Affiliates
Broadcast
Customer acquisition channels Experian modelling and analytics
Experian data assets
Customer monetisation Customer acquisition
Lead generation
Experian products
Advertisers 50
Experian Interactive PriceGrabber Classes USA /Affiliate Fuel
Consumer Direct MetaReward
LowerMyBills
Experian Interactive Pro forma sales in H1 2005 51
US mortgage market $bn
US mortgage originations Year to December
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500
Purchase originations Source: Mortgage Bankers Association – December 2005
07F
06F
05
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
0
Refinance originations 52
Financial calendar
12 April 2006
-
Second Half Trading Update
24 May 2006
-
Preliminary Results
19 July 2006
-
AGM and First Quarter Trading Update
16 November 2006
-
Interim Results
53
Contacts GUS plc One Stanhope Gate London W1K 1AF Tel: +44 20 7 495 0070 Fax: +44 20 7 495 1567 Website: www.gusplc.com David Tyler Group Finance Director Tel: +44 20 7 318 6204 Fax: +44 20 7 318 6257 Email: [email protected]
Fay Dodds Director of Investor Relations Tel: +44 20 7 318 6245 Fax: +44 20 7 318 6253 Email: [email protected]
Peter Blythe Director of Finance Tel: +44 20 7 318 6230 Fax: +44 20 7 318 6253 Email: [email protected] 54
